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02/12/2015

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We  offer cloud-based accounting solutions.  Using good technology saves time.  With the power of cloud accounting in your hands, you can access accurate real-time data on the go, accept instant payments and even automate repetitive tasks like invoicing. Fast, easy, touch-of-a-button software can make a real difference to the way you run your business.

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... a digital firm using the best tech to help our clients

Welcome to Adrian Mooy & Co Ltd

like yours grow and be more profitable.

We offer a personal service and welcome new clients.

We are a firm of Chartered Certified Accountants

and tax advisors in Derby helping businesses

From start-up to exit & everything in-between.

Whether you’re struggling with company formation,

Adrian Mooy & Co - Accountants Derby

Call us on 01332 202660

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annual accounts and taxation, payroll or VAT you can

count on us at every step of your business’s journey.  For

VAT & payroll please contact us.

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If you are looking for a Derby accountant then please contact us.

○  Tax solutions to help you keep more of your income

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Accountants Derby

Services

We offer a range of high quality services

Web-based accounting

Xero is a web-based accounting system designed with the needs of small business owners in mind.

 

It can automatically connect to your bank and download your bank statements. From there it’s simple to tell Xero what transactions relate to and once told it remembers and looks out for similar transactions. This saves time and makes keeping your accounts up to date easier.

 

Log in from any web browser. As your accountant we can log in and provide help.

 

Making Tax Digital - VAT

Our process for delivering tax accounting vat self assessment and payroll services

 

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Our Process

Understand your needs

Firstly we listen and gain an understanding of your business and what you are aiming to achieve.

Continuous improvement

We seek your opinions on the service we provide and respond to feedback in order to upgrade and improve what we do.

Build a relationship

Success in business is based around relationships and trust. Our objective is to develop and build strong relationships with our clients, based on two way trust and respect.

Confirm your expectations

Our aim is  to help you maximise your business potential and we tailor our service to meet your requirements and agree a timetable for delivering them.

Actively communicate

Communication is important to the success of any commercial venture. It is therefore a vital part of our work with you, sharing the knowledge and ideas that help you to realise your ambitions.

Our Process

Understand your needs

Confirm your expectations

Actively communicate

Build a relationship

Continuous improvement

Straightforward and easy to deal with Adrian Mooy & Co provide an efficient, friendly and professional service - payroll, tax returns, annual accounts and VAT returns are always done on time.    Eddie Morris

Call us on 01332 202660

Testimonials

First class! Super accountant! We have been with Adrian Mooy & Co since 1994. They provide a prompt, accurate & reliable service. There is always someone at the end of the phone to help and advise us. They have always delivered and we are more than happy to recommend them.    Ian Cannon

Helpsheets

  • What are Super-deductions?

    A new tax investment incentive for companies

    Perhaps the most innovative give-away in the recent budget was “Super-deductions for investment expenditure”.

    What does this mean?

    Companies that invest in qualifying plant and machinery in the period from 1 April 2021 to 31 March 2023 will benefit from enhanced capital allowances. Investments in assets that qualify for the main rate of capital allowances of 18% will benefit from a 130% first-year allowance. This means that for every £100 that you spend, you can deduct £130 in computing your taxable profits. This is equivalent to a tax saving of 24.7%.

    What this does not mean?

    What this change does not mean is the notion that you can deduct 130% of the cost of a qualifying purchase from your tax bill. The deduction is made from your company’s taxable profits.

    For example…

    If your company invests say £5,000 in qualifying plant it will be able to write off £6,500 (£5,000 x 130%) against its taxable profits. If your company has taxable profits more than £6,500, it will save £1,235 (£6,500 x 19%) in corporation tax. Which means:

    ·         Your tax saving is 24.7% (£1,235/£5,000) of your investment cost, and

    ·         The net cost of your investment is effectively £3,765 (£5,000 - £1,235).

    Beware the fine print

    As you would expect, there will be circumstances – grey areas – where the legislation that maps out the do’s and don’ts to claiming this relief will deny you the 130% deduction. In their notes describing the proposed changes HMRC said:

    “Certain expenditures will be excluded…, there will be exclusions for used and second-hand assets and expenditures on contracts entered into prior to 3 March 2021 even if expenditures are incurred after 1 April 2021. Plant and machinery expenditure which is incurred under a Hire Purchase or similar contract must also meet additional conditions to qualify for the super-deduction...”

    And there are alternatives

    Even if you cannot claim this 130% Super-deduction, your expenditure may qualify for the existing 100% Annual Investment Allowance, a 50% or 100% First Year allowance or a range of writing down allowances.

    Check out if you could claim

    However, this is a significant incentive to invest if your company is likely to be profitable from 1 April 2021. To ensure that any significant investment you may make will qualify for the Super-deduction or to discuss other tax options, please call.

  • New system for 2019/20 late filing penalty appeals

    Due to the pandemic many taxpayers missed not only the usual 31 January 2021 deadline for submitting their 2019/20 self-assessment tax returns but the extended one of 28 February. To reduce admin for agents HMRC is introducing a simplified appeal process against the resulting penalties. How will it work?

    Taxpayers who missed the 28 February deadline for filing their 2019/20 self-assessment will automatically be charged a late filing penalty of £100. They have the right to appeal against the penalty if they have a reasonable excuse for filing late. This includes being prevented from meeting the deadline because of direct or indirect effects of the pandemic. HMRC expects this will apply to many taxpayers who are represented by accountants.

    HMRC is therefore providing a bulk appeal process which accountants can use to file appeals on behalf of their clients where coronavirus was the root cause their returns being late. The process will be available from 24‌‌‌ ‌March for a period of six months.

    There are conditions and exclusions for using the bulk service, for example accountants must use HMRC’s special template.

  • Electric cars from April 2021

    For 2020/21, it was possible to enjoy an electric company car as a tax-free benefit. While this will no longer be the case for 2021/22, electric and low emission cars remain a tax-efficient benefit.

    How are electric cars taxed? - Under the company car tax rules, a taxable benefit arises in respect of the private use of that car. The taxable amount (the cash equivalent value) is the ‘appropriate percentage’ of the list price of the car and optional accessories, after deducting any capital contribution made by the employee up to a maximum of £5,000. The amount is proportionately reduced where the car is not available throughout the tax year, and is further reduced to reflect any contributions required for private use.

    The appropriate percentage - The appropriate percentage depends on the level of the car’s CO2 emissions. For zero emission cars, regardless of whether the car was first registered on or after 6 April 2020 or before that date, the appropriate percentage for electric cars is 1% for 2021/22. For 2020/21 it was set at 0%.

    This means that the tax cost of an electric company car remains low in 2021/22.

    Example - J has an electric car with a list price of £30,000. The car was first registered on 1 April 2020.

    For 2020/21, the appropriate percentage for an electric car was 0%, meaning that J was able to enjoy the benefit of the private use of the car tax-free.

    For 2021/22, the appropriate percentage is 1%. Consequently, the taxable amount is £300 (1% of £30,000).

    If Jaz is a higher rate taxpayer, he will only pay tax of £120 on the benefit of his company car. If he is a basic rate taxpayer, he will pay £60 in tax. This is a very good deal.

    His employer will also pay Class 1A National Insurance of £41.40 (£300 @ 13.8%).

    For 2022/23 the appropriate percentage will increase to 2%.

    Low emission cars - If an electric car is not for you, it is still possible to have a tax efficient company car by choosing a low emission model.

    The way in which CO2 emissions are measured changed from 6 April 2020. For 2020/21 and 2021/22, the appropriate percentage also depends on the date on which the car was first registered as well as its CO2 emissions. For low emission cars within the 1—50g/km band, there is a further factor to take into account – the car’s electric range (or zero emission mileage). This is the distance that the car can travel on a single charge.

    The following table shows the appropriate percentages applying for low emission cars for 2021/22.

    Appropriate percentage for 2021/22 for cars with CO2 emissions of 1—50g/km

    Electric range                Cars first registered           Cars first registered

                                          before 6.4.2020                 on or after 6.42020

    More than 130 miles                  2%                                    1%

    70—129 miles                            5%                                    4%

    40—69 miles                              8%                                    7%

    30 – 39 miles                             12%                                  11%

    Less than 30 miles                    14%                                  13%

    As seen from the table, choosing a car with a good electric range can dramatically reduce the tax charge. Assuming a list price of £30,000, the taxable amount for a car first registered on or after 6 April 2020 with an electric range of at least 130 miles is £300 (£30,000 @ 1%); by contrast, the taxable amount for a car with the same list price first registered before 6 April 2020 with an electric range of less than 30 miles is £4,200 (£30,000 @ 14%).

    The moral is to choose a new greener model & you will be rewarded with a lower tax bill.

  • SEISS Action if claiming the 4th grant

    Action to take if eligible for the 4th SEISS grant Feb-Apr 2021

    Look out for communication from HMRC April 2021

    HMRC will be contacting you in mid-April to let you know if you are eligible to claim the 4th SEISS grant for the quarter ending 30 April 2021.

    This will be sent by letter, email or within HMRC’s online service and it will advise you of the earliest date you can make your claim.

    Before making your claim

    To make your claim you will need to gather together the following information:

    • Your self-assessment unique taxpayer reference (UTR)

    • National Insurance number

    • Government Gateway user ID and password

    • Your UK bank details including sort code, account number, name on the account and address linked to the account.

    You may also need to answer questions about your passport, driving license or other information held on your credit file.

    You may need to back up your claim

    You will need to keep evidence that your business has suffered reduced activity. For example, business accounts show reduced activity, records of cancelled contracts or appointments, record of any dates you suffered reduced activity due to lockdown or similar government restrictions.

    Additionally, you will need to keep details of the following:

    • A record of dates you had to close due to government restrictions

    • NHS Test and Trace instructions if self-isolating

    • NHS instruction to shield

    • Test results if diagnosed with coronavirus

    • Letters from school regarding closures that required you take on additional child care

    Making your claim

    You can only apply online, and the online service is timed to open from late April 2021. Your letter from HMRC will advise you of the earliest date you can apply.

    You must make the claim personally, we cannot do this for you.

    Once you have completed the claims process you should receive your grant within 6 days.

    We can help

    Although we cannot directly make claims for clients we can help if you are unsure if you should make a claim or you are having difficulty completing the online application process.

  • Reporting Benefits in Kind (BiKs)

    Filing deadlines and tax saving tips for 2020-21

    At the end of each tax year, you will usually need to submit a P11D form to the tax office for each employee you have provided with expenses or benefits, for example, a company car.

    The total taxable benefits you provide to all employees will also create a Class 1A employer’s NIC charge, and this will need to be reported to HMRC by filing a further return, P11D(b).

    Note: If HMRC have asked you to submit a P11D(b), but you have no taxable benefits to report, you can tell them you do not owe Class 1A NIC by completing a formal declaration via your online government gateway account.

    What are the filing deadlines for 2020-21?

    What you need to doDeadline

    Submit your P11D forms online to HMRC - 6 July 2021

    Give your employees a copy of the information on your forms - 6 July 2021

    Tell HMRC the total amount of Class 1A National Insurance you owe on form P11D(b) - 6 July 2021

    Pay any Class 1A National Insurance owed on expenses or benefitsMust reach HMRC by 22 July 2021 (19 July 2021 if you pay by cheque)

    Note: You will be charged a penalty of £100 per 50 employees for each month or part month your P11D(b) is late. You will also be charged penalties and interest if you are late paying HMRC.

    Talk to us before you file your P11D returns

    There may be tax saving opportunities you could discuss with employees that would save them income tax and you the additional NIC charge. We have outlined two ideas for company car drivers you could consider below.

    Avoiding the car fuel benefit charge

    Employees not only pay additional tax for the use of a company car, but they also pay a hefty additional tax charge if their employer pays for private fuel. The car fuel benefit charge can be avoided if the employee records actual private mileage and repays their employer based on an agreed rate per mile.

    Were company car drivers furloughed during 2020-21?

    If any of your employees that had the use of a company car were furloughed during 2020-21, and the car was not made available for private use during this period, you can advise HMRC of the “not available” period when you complete their P11D. This will reduce any benefit charges for 2020-21.

    Let us help you crunch the numbers

    Please call if you would like to discuss options to reduce BiK tax charges for your employees or prepare and file the necessary returns. And do not forget, if you can reduce income tax charges for employees you will not only boost their moral, but you will also lower the amount of Class 1A NIC that you will have to pay as their employer.

  • Doing up properties – Are you trading?

    There can be money to be made buying a property in a dilapidated state, renovating it, and selling it for a profit. However, when it comes to tax, it is important to know whether the ‘profit’ element is a capital gain or a trading profit. This will determine how it is taxed and at what rate.

    Trading or investment

    The tax consequences will depend on whether the property is an investment or whether there is a trade. The question is whether you are a property developer or a property investor.

    Much of it comes down to your intention when you bought the property. If the aim was to buy the property, do it up and then let it out, the property will count as an investment property. However, if the intention is to buy, renovate and sell at a profit, HMRC may regard you as trading. However, an intention to sell at a profit at some point in the future does not automatically mean you are trading. Also plans change, and a property purchased as a long-term investment might be sold after a relatively short period of time as a result of a change in personal circumstances.

    Badges of trade

    The concept of the ‘badges of trade’ has been developed from case law and provides something of a checklist which can be used to determine whether an activity is a trade or an investment. The six badges of trade are as follows:

    1. The subject matter of the transaction.

    2. The length of the period of ownership.

    3. The frequency or number of similar transactions.

    4. Reasons for the sale.

    5. Motive when acquiring the asset.

    Where there is a trade, the property will only be held for as long as it takes to do up and sell. A property developer is likely to develop more than one property, either simultaneously or in succession. Where there is a trade, the property will be sold to realise a profit; for an investment property, the sale may be triggered by other factors.

    Case study 1

    Paul inherits some money and invests in a property, which he plans to do up and rent out. He completes the renovations and rents out the property for six years before selling it to enable him to buy a larger family home.

    The property was purchased as an investment and would be regarded as an investment property. The gain on sale would be liable to capital gains tax.

    Case study 2

    Mark sees a run-down property on the market and spots the opportunity to make a profit. He buys the property, spends six months renovating it, selling once complete, making a profit of £40,000. He invests the proceeds in another property to renovate and sell.

    Mark would be treated as trading. His aim is to sell the properties at a profit. Consequently, he would be liable to income tax rather than capital gains tax on the profit.

  • Making a formal complaint against HMRC

    Sometimes a taxpayer may find themselves in a position whereby HMRC seem to be taking an inordinate amount of time to settle a particular issue or the service received as a 'customer' does not meet the standards expected or even that they feel they are being discriminated against. Although complaints can be made in several ways, ('informal' being where a taxpayer only wishes to express their dissatisfaction without seeking compensation), should the taxpayer want to formalise the complaint HMRC has a set complaints procedure under the 'HMRC Charter'.

    The starting point for any formal complaint is either a phone call or completion of the online iForm that can be found on the taxpayer's own government gateway or by writing a letter.  The complaint will be dealt first by the original point of contact whenever possible. HMRC has empowered complaint handlers to make decisions without needing to refer to a higher-level policy unit. In the month to February 2021, 4,149,407 complaints were received.

    If, after further correspondence with that person the taxpayer is still dissatisfied then HMRC can be asked to review the matter again (termed 'Tier 1'). This time the review is undertaken by an impartial special complaints officer separate from whoever responded to the initial complaint. That officer will review the file, analysing each stage so that any errors in procedure may be identified. This review should take approximately a month although currently it may take longer due the impact of the coronavirus on staffing levels. Even so, HMRC statistics show that in February 2021 a total of 5,497 complaints were elevated to 'Tier 1' with approximately 45% being upheld.

    If, after receiving the result of their review, the taxpayer is still not satisfied, then they can ask for another review to be undertaken by a different member of the complaints team who will give a final response (termed 'Tier 2'). In February 2021, 402 such complaints were re-reviewed, 34% being upheld.

    Should the file have gone through the steps above, with the complaint being fully investigated but the taxpayer still not satisfied, then the next step is to complain to the independent adjudicator. This department is independent of HMRC but has an office within HMRC as part of their service level agreement.

    The final step is to take the complaint to the parliamentary ombudsman via the taxpayer’s MP in a letter for the attention of the Parliamentary and Health Service Ombudsman if the taxpayer is still not satisfied.

    Financial redress

    The aim of HMRC's complaints procedure is first and foremost to put things right and apologise if it is found that the case has been acted upon incorrectly. However, the Charter allows financial compensation in some instances, for example, reimbursement costs which have been reasonably incurred by the complainant as a direct result of HMRC's actions, or compensation for the worry and distress that the mistakes and/or delays may have caused the taxpayer.

    These costs include basic quantifiable amounts such as 'out of pocket' expenses (travel, stationery, postage and telephone costs). Professional fees for advice given to a taxpayer as to the complaint are only considered where the taxpayer would face extreme hardship by paying the invoice and the situation is likely to continue for an uncertain period. Other more relative costs depend on the circumstance and not designed to put the taxpayer in a better position financially than would be the case if everything has gone smoothly. The Charter states that payments are for 'demonstrable financial loss, but not for any loss which is hypothetical, speculative or insubstantial'. In the context of our policy on remedy, the term 'demonstrable' should be understood to mean 'evidenced beyond reasonable doubt'.

    Consolatory payments are not the taxpayers’ by right and will only be considered where it is proved that there has been a serious (or persistent) error. A complainant is certainly not going to get rich on such proceedings as there are strict monetary limits. Payment will usually be within the range of £50 to £250 although payments of up to £1,000 or even £2,000 will be considered.

  • Reduced rate of VAT for hospitality and leisure

    The hospitality and leisure industries have been severely affected by the Coronavirus pandemic. To help businesses in these sectors to get back on their feet, a reduced rate of VAT of 5% rather than the standard rate of 20% will apply to certain supplies for a limited period, from 15 July 2020 to 12 January 2021.

    Hospitality

    Food and drink supplied for consumption in the premises, for example by a restaurant or a bar, and hot takeaway food and beverages are normally liable for VAT at the standard rate of 20%. During the support period, the 5% rate will apply instead to:

    • hot and cold food for consumption on the premises on which they are supplied;

    • hot and cold non-alcoholic beverages for consumption on the premises on which they are supplied;

    • hot takeaway food for consumption off the premises on which it is supplied;

    • hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied.

    Hotel and holiday accommodation

    For businesses supplying hotel and holiday accommodation, the 5% rate VAT applies during the support period to:

    • supplies of sleeping accommodation in a hotel or similar establishment;

    • certain supplies of holiday accommodation;

    • charge fees for caravan pitches and associated facilities;

    • charge fees for tent pitches and camping facilities.

    Meals provided to guests in long-term holiday accommodation (more than 28 days) will also benefit from the reduced rate, but the hire of motor caravans will not.

    Admission to attractions

    The reduced rate of 5% also applies during the support period in respect of admission to certain attractions which would normally be liable for VAT at the standard rate. However, if the admission fee is exempt from VAT, this will take precedence over the 5% charge and the admission charge will remain exempt.

    The temporary reduction will apply to admissions to shows, theatre, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events where these are not included in the existing cultural exemption.

    Impact on flat rate scheme

    VAT registered businesses using the flat rate scheme should note that some of the flat rate percentages have been reduced to take account of the temporary reduction in the rate of VAT.

  • Take advantage of the enhanced carry back of losses

    Many businesses have suffered losses as a result of the Covid-19 pandemic, and where a business has made a loss, various options are available to obtain relief for that loss. The challenge is to make the best use of the loss.

    To help loss-making businesses, legislation is to be introduced to increase temporarily the period for which a business can carry back a loss from one year to three years. The extended carry back is available to both unincorporated business and companies, and can be used to generate a useful tax repayment at a time when cash flow is tight.

    Unincorporated businesses - Under the existing rules, a person who incurs a trading loss in a tax year can make a claim to offset the loss of their net income of the current year, the previous year or both years. This option is now available to traders using the cash basis.

    For a limited period, the carry-back period will be extended, and losses can be carried back and set against trading profits of the previous three years. from one. Losses carried back must be set against the income of a later year before an earlier year. The extended carry back will apply to losses in 2020/21 and 2021/22. It will enable a loss for 2021/22 to be carried back where a loss was also made in 2020/21 and the individual had no other income for that year.

    Example - Lottie is a beautician. She prepares accounts to 31 March each year. For the year to 31 March 2021, she made a loss of £12,000. It is assumed that she made a loss of £7,000 for the year to 31 March 2022.

    She had trading profits  of £27,000 in 2019/20, £20,000 in 2018/19 and £16,000 is 2017/18.

    She carries the loss of £12,000 back to 2019/20 reducing her profits to £15,000 for that year and generating a tax repayment of £2,400 (£12,000 @ 20%).

    In the absence of the extended carry back, if she had no other income (or gains) for 2021/22 and no income for 2020/21, Lottie would have to carry the loss from 2021/22 forward to set against other profits from the same trade. However, the extended carry-back allows her to carry the loss back to set against trading profits of  2019/20. Although, this will reduce her profits to £10,000, which is below the personal allowance for that year of £12,500, it will generate a tax repayment of £500 (£2,500 @ 20%), which may be useful.

    As the loss cannot be tailored to preserve the personal allowance, if she does not want to waste any of her personal allowance for 2019/20, she can instead carry the 2021/22 loss forward.

    Companies - The extended back also applies for corporation tax purposes for losses incurred in accounting periods ending between 1 April 2020 and 31 March 2021 and losses incurred in accounting periods ending between 1 April 2021 and 31 March 2022.

    For corporation tax purposes, losses can be carried back to the preceding accounting period. Where the extended carry-back applies, a loss can be carried back and set against profits of the same trade for the preceding year and two previous years, with losses being set against a later year before an earlier year.

    Example - ABC Ltd makes a loss of £40,000 for the year to 31 January 2021 and a loss of £25,000 for the year to 31 January 2022. The company made a profit of £30,000 for the year to 31 January 2020, a profit of £50,000 for the year to 31 January 2019 and a profit of £42,000 for the year to 31 January 2018.

    The loss for the year to 31 January 2021 is carried back and set against the profit of £30,000 for the year to 31 January 2020, with the remaining £10,000 set against the profit of £50,000 for the year to 31 January 2019, reducing it to £40,000. This generates a corporation tax repayment of £7,600 (£40,000 @ 19%).

    The loss of £25,000 for the year to 31 January 2022 is carried back and set against the remaining profits for the year to 31 January 2019, reducing them to £15,000. This generates a tax repayment of £5,000 (£25,000 @20%).

    Without the extended carry back, it would only have been possible to carry-back £30,000 of the loss for the year to 31 January 2021, reducing the repayment to £5,700. Using the extended carry back increases the total repayment by £6,900.

  • Useful Links

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  • Directors’ loan accounts

    A 'Directors Loan Account' (DLA) is an account in the company’s financial books that records all transactions between a director who is a participator (or another participator) and the company.

    Transactions through the account include:

    • a loan to the company from the director; or visa versa
    • monies drawn by the director on account of salary, dividend or expenses
    • director's private bills paid for by the company
    • company bills paid personally by the director
    • shares issued on company incorporation but not paid for

    Salary paid directly to a director under a contract is not recorded in the DLA as the monies will have been paid and therefore not owed by the company.

    DLA in credit - When a company incorporates it is not unusual for directors to lend money to the business and this will show in the DLA as a 'loan' from the director to the company. As the DLA will be in credit, the director can draw on the credit balance at any time with no tax or National Insurance implications for either him/herself or the company. However, if the company pays interest on the loan, the director will be liable for tax on that interest, declaration being on the personal tax return. The company also needs to declare the payment to HMRC.

    A DLA may also have a credit balance should salary or dividends be allocated to a director, but they do not draw payment. Non take-up may be for various reasons e.g. the company may be experiencing cash flow problems or the director may receive other income that might take him into higher rate tax and he does not want that to happen.

    DLA in debit/overdrawn - Company - Invariably the DLA will be overdrawn throughout the accounting year as directors withdraw payments on account of dividends and expenses from the company bank account - each payment being recorded in the DLA. The directors may be liable to pay a benefits-in-kind tax charge if the outstanding balance on the director’s loan account is more than £10,000 at any point in the tax year. The company will be liable to Class 1A employers NIC.

    At the end of the year, it is not unusual to find that insufficient profits have been generated to cover the amount that has been withdrawn, even after taking the salary and dividends into account, the net result being that the director will owe money to the company as the account will be overdrawn.

    This overdraft must be repaid if there are to be no tax implications for both the director and the company. Should the loan exceed £15,000 and be made to a full-time working director whose interest in the company is more than 5% of the share capital then the loan needs to be repaid by the due date of payment of corporation tax (i.e. within nine months and one day of the accounting period). If this does not happen then the company is liable to a tax charge at 32.5% (a 'section 455' charge) on the outstanding loan at that date. If the loan is subsequently repaid after the charge has been paid then the tax is refunded (although not until nine months and one day after the end of the company's accounting period in which the loan is repaid or reduced).

    Director - Should the total of all outstanding loans from the company exceed £10,000 at any time during a tax year then the director is considered to have received a 'benefit in kind' from his employment. The charge is on the difference between the interest paid (if any) and interest payable at the 'official rate'. The company will pay employers NIC on the charge and be required to declare the 'benefit' on the annual P11D form.

    HMRC is taking an increasingly dim view of such loans not least because remuneration or dividends are taxable as income when a loan is not. They will commonly ask for a detailed analysis of the DLA looking for such discrepancies as failure to notify liability to a section 455 charge. 'Bed and breakfasting’ transactions (where the DLA loan is correctly repaid within the nine months stated but then the money is redrawn shortly after repayment through another separate loan) are also an area of interest as is failure by the company to apply PAYE at the correct time to bonuses credited to the DLA.

  • Can you claim SEISS 4th & 5th payouts during 2021?

    If you commenced self-employment after 5th April 2019

    If you started your self-employment after 5 April 2019, you were denied support under this scheme from the first three quarterly payouts to 31 January 2021.

    The good news is that due to lobbying by tax professionals and self-employed support groups the SEISS is being opened to traders who commenced after 5 April 2019. However, there is an additional hurdle to jump before you can make a claim; your tax return for 2019-20 needs to have been filed by midnight 2 March 2021.

    Additionally, your business must be adversely affected by the pandemic and your profits from self-employment must be at least 50% of your income and less than £50,000.

    If you commenced self-employment on or before 5th April 2019

    If you qualified for the first three grants, you should qualify for the further grants due this year unless your circumstances have changed, for example, if you are no longer adversely affected by COVID disruption.

    For those of you who may be claiming for the first time, you will need to claim using your online tax account. HMRC should advise you when the claims process is open for business.

    If claiming the fourth grant – 1 February 2021 to 30 April 2021

    The fourth grant under the scheme covers February to April 2021. It is worth three months’ average profits capped at £7,500 and can be claimed from late April.

    If claiming the fifth and final grant – 1 May 2021 to 30 September 2021

    The fifth and final grant covers the period from May to September 2021. The amount of the grant will depend on the impact that Covid-19 disruption has had on your profits.

    • If your turnover has fallen by 30% or more because of Covid-19, you will be able to claim agrant equal to 80% of your average profits for three months, capped at £7,500.
    • However, if your turnover has dropped by less than 30%, you will be entitled to a reducedgrant of 30% of three months’ average profits, capped at £2,850.

    The final grant can be claimed from late July.

    There is a potential misfit in this fifth grant. Although it covers a five-month period (May – September 2021) the actual payout for this period is based on three months. What about the other two months?

  • More time to pay back deferred VAT and tax

    At the start of the pandemic, VAT registered businesses were given the option of deferring payment of any VAT that fell due in the period from 20 March 2020 to 30 June 2020. Self-assessment taxpayers were also given the option of delaying their second payment on account for 2019/20, which was due by 31 July 2020. In his Winter Economy Plan, the Chancellor extended the deadlines by which the deferred tax must be paid, giving further help to those struggling to pay their tax bills as a result of Coronavirus.

    VAT

    VAT-registered businesses which took advantage of the opportunity to delay paying VAT that fell due between 20 March 2020 and 30 June 2020 were originally required to pay the deferred VAT by 31 March 2021. However, there is now another option for those for whom this presents a challenge, and they can instead pay the deferred VAT in smaller equal instalments up to the end of March 2022. Those wishing to take advantage of the instalment option will need to opt into the scheme; failure to do this will mean that the VAT owed will need to be repaid by 31 March 2021. Where businesses are able, they can if they so wish pay the deferred VAT in full by 31 March 2021.

    Depending on the business’ VAT quarter dates, deferred VAT will relate to the quarter ending 29 February 2020, the quarter ending 31 March 2020 or the quarter ending 30 April 2020. VAT due after 30 June 2020 (i.e. for the quarter to 31 May 2020 and subsequent quarters) must be paid in full and on time. Where direct debits were cancelled, these should be reinstated if this has not already been done.

    Regardless of whether the instalment option is chosen or not, the deferred VAT will need to be paid in addition to the usual VAT payments, and it is prudent to budget for this.

    Self-assessment

    Under the original proposals, self-assessment taxpayers could delay paying their second payment on account for 2019/20 due by 31 July 2020 and instead pay it by 31 January 2021, along with any balancing payment due for 2019/20 and the first payment on account due for 2020/21. For some taxpayers who have been affected financially by the pandemic, this will be something of a stretch. In recognition of this, self-assessment taxpayers who are finding it difficult to pay what they owe can set up an automatic time to pay arrangement online, as long as they do not owe more than £30,000 in tax.

  • Running a car on the company - Benefit in kind

    Despite successive Governments changing the rules to increase the tax take, the provision of company cars remains one of the more popular benefits an employer can give to an employee.

    Benefit in kind

    A director or employee who earns more than £8,500 is charged an amount as a benefit in kind (BIK) if the car is used by an employee but owned by the employer. The calculation is a percentage of the car's list price appropriate to the level of the car’s CO2 emissions, i.e. the higher the CO2, the higher the tax. An additional rate is charged in respect of car fuel provided for private use. With fully electric vehicles increasingly becoming the 'norm' 2020/21 saw the BIK charge reduce to 0% before rising to 1% in 2021/22 and then 2% through to April 2025. This massive reduction in percentage makes arguments for a company car alternative seem outdated. However, there is still a place for alternatives.

    A company car allowance is a cash allowance added to the employees' salary allowing them to purchase or lease a vehicle privately. It offers the employee the perks of having a new vehicle without the employer having the hassle of running a car fleet. As the payment paid is part of the salary it is charged to tax at the usual income tax and NIC rates under PAYE.

    There are no set rules as to the amount that the employer can pay as a company car allowance but it is generally assumed that the cash offered will be approximately the same amount as the employer would have paid to lease the company car.

    Employees paid an allowance

    Where an employee is paid an allowance for using a personally owned car on business, this is tax-free up to a certain point. Currently, if the payment made is 55p for example, for each business mile 45p of this can be claimed and paid tax-free; the balance of 10p being taxable. How the payment is made will determine whether an exemption is allowed for NI purposes. To avoid the NIC charge car allowances need to be paid in proportion to the amount of business travel and then the 45p per mile exemption can be claimed.

    If directors or employees are paid a fixed allowance towards their car’s running costs, then the amount needs to be on a sliding scale linked to the expected business mileage (e.g. those who expect to travel up to 4,000 miles per year receive one set rate, up to 8,000 miles a different amount and above that another etc.) This way, initially NIC will be payable on the allowance and then, the NI-free element of the allowance can be calculated when the exact business mileage is known; any amount overpaid can be refunded.

    Using your own car

    Many employees use their own car for business purposes and pay for the fuel used via a company fuel card. For a car fuel tax charge to arise, the employee must first be chargeable to tax in respect of the car, which means it must be a company car and used by either a director or an employee. There will be a BIK charge on the cost of the private fuel obtained by using the company card unless the employee reimburses for the private fuel used.

    To ensure that the rules are adhered to, the company should have a written policy in place as confirmation. In addition, procedures should be put in place to keep accurate mileage records and a monthly amount for private mileage can then be deducted from net salary.

  • CIS compliance for property developers

    The Construction Industry Scheme (CIS) is a scheme whereby contractors of building firms are required to deduct tax at source from payments made to sub-contractors working for them. Some sub-contractors are entitled to be paid without any tax deduction, others at 30% as per HMRC's instructions but the majority have 20% tax withheld before payment. The scheme requires registration as a contractor and administration in the form of monthly submissions; the penalties for non and/or late submission can be severe.

    Definitions

    The definition of 'contractor' is widely drawn - HMRC's Construction Industry Scheme guide CIS 340 defines a (mainstream) contractor as 'a business or other concern that pays subcontractors for construction work. Contractors may be construction companies and building firms, but may also be ... many other businesses.'

    The definition of ‘construction work’ is again widely drawn to include the construction, alteration, repair, extension, demolition or dismantling of buildings and/or work - although there are exceptions. A business set up to undertake such construction work is obviously required to operate the scheme as would a property developer undertaking a trading business in construction of properties being developed for sale (even if just on one property). Private householders paying for work on their own homes will never fall within the CIS regime's scope.

    Buying property as an investment

    In comparison, someone who buys and rents out property typically does so as an investment; this would appear to be confirmed as under section 12080 of The Construction Industry Scheme Reform Manual it states that:

    "A 'property investment business' is not the same thing as a 'property developer'. A property investment business acquires and disposes of buildings for capital gain or uses the buildings for rental.“

    However, a problem arises when an investor landlord buys a property, doing it up intending to keep it as a rental property - is that person now a developer and therefore caught under the CIS rules? HMRC confirm that this is the case as further on in the CIS manual it states that:

    "Where a business that is ordinarily a property investor, undertakes activities attributed to those of ‘property development’, they will be considered a mainstream contractor [caught for CIS] during the period of that development".

    Therefore, the investor now becomes a developer liable to register as a contractor under the CIS regime even if just one property is renovated.

    Wider scope for the CIS scheme

    The system goes further because even where the landlord is predominantly a property investor and therefore not a construction business (e.g. a restaurant chain), they are deemed to be a contractor and subject to the CIS regime if they spend more than £1 million a year, on average, for three years on ‘construction operations’ (e.g. repairs, construction of extensions etc), on their premises or investment properties. There is a slight 'let out' in that such businesses can ignore expenditure on property such as offices or warehouses used by the business itself.

    Some businesses commission construction firms to undertake work for them but if the work is for the business's own premises, used for that business, then the business itself is not obliged to register or act as a CIS contractor.

    ‘De minimus’ limit

    There is a 'de minimus' limit in that on application, HMRC can authorise deemed contractors not to apply the scheme to small contracts for construction operations amounting to less than £1,000, excluding the cost of materials however this arrangement does not apply to mainstream contractors.

  • Temporary increase in SDLT residential property threshold

    Stamp Duty Land Tax (SDLT) is payable where property is acquired in England and Northern Ireland. Land and Building Transaction Tax (LBTT) is payable in Scotland and Land Transaction Tax (LTT) is payable in Wales,

    SDLT is payable where the chargeable consideration exceeds the relevant threshold at the rates applicable to each slice of the consideration. A supplement of 3% applies to second and subsequent residential properties where the consideration is more than £40,000. The supplement does not apply where the main residence is exchanged.

    Temporary increase in residential threshold

    The SDLT residential threshold was temporarily increased to £500,000 from 8 July 2020 to 31 March 2021. The thresholds applying for LBTT and LTT were also increased for a temporary period, but these are not considered here.

    Property investors and those buying second homes also benefitted from the increase as the 3% supplement is applied to the rates, as reduced.

    Extension

    The residential threshold will remain at £500,000 beyond 31 March 2021 and will stay at this level until 30 June 2021. From 1 July 2021 until 30 September 2021 it will reduce to £250,000 returning to its normal level of £125,000 from 1 October 2021.

    The first time buyer threshold will return to £300,000 for properties up to £500,000 from 1 July 2021.

    Window of opportunity

    The extension to the period for which the £500,000 threshold is in place provides an opportunity for investors to save money if they can complete by 30 June 2021. If this is not possible, there are still savings on offer where completion takes place by 30 September 2021.

  • Selling a property post death – Is there a CGT charge?

    For capital gains tax purposes, there is a tax-free uplift to the market value at the date of death, irrespective of whether any inheritance tax is payable at the estate. This effectively resets the base value for capital gains tax purposes going forward.

    Many estates include a property, whether a main home, or investment properties as well. Where these are sold post death, the issue of whether a capital gains tax liability arises will need to be considered.

    Who is selling? - Where a property that forms part of the deceased’s estate is to be sold, the outcome is different depending on whether the executors or administrators are selling the property, for example, to realise cash to distribute to the beneficiaries, or whether legal title has been transferred to the beneficiary/beneficiaries, who have decided to sell.

    Sale by executor or personal representative - Where a property is sold by the executor or personal representative following the deceased death, the estate will be liable for any capital gains tax.

    Executors collectively are entitled to a single annual exempt amount for disposals in the tax year in which death occurred and the two following tax years. After this, there is no annual exempt amount to mitigate any capital gain. Any chargeable gain on a residential property (after deducting any available annual exempt amount) is charged at the higher residential rate of 28%.

    Chargeable gains on residential property must be notified to HMRC within 30 days of completion. The associated capital gains tax should be paid in the same time frame.

    What about the main residence exemption?

    In certain situations, a post-death disposal by the personal representatives may benefit from the main residence exemption. This is the case where:

    immediately before and immediately after the death of the deceased, one or more individuals occupied the property as their only or main residence;

    the individual or individuals is/are entitled to at least 75% of the net sale proceeds or to an interest in possession of 75% or more of the net sale proceeds; and

    the personal representatives makes a claim for private residence relief.

    A claim may be possible where, say, a property is owned by a married couple as tenants in common, each with a 50% share. The husband dies, leaving 70% of his share to his wife and 30% of his share to his daughter. On sale by the executors following his death, the deceased’s spouse is entitled to 85% of the net sale proceeds and the deceased’s daughter to 15%. As the property has been the wife’s main residence before and after the deceased death, the personal representatives can claim the main residence exemption.

    Sale by the beneficiary - If legal title to the property is transferred to the beneficiary or beneficiaries following the deceased’s death, their base cost for capital gains tax purposes is the market value at the date of death. If they subsequently sell the property and it is not their main residence, a chargeable gain will arise. They will benefit from their own annual exempts amount to the extent not used elsewhere, and any available capital losses. The gain will be charged at the appropriate residential rate – 18% or 28%. The gain must be reported to HMRC within 30 days and the tax paid within this window.

    If the property is occupied after the deceased’s death as the beneficiary’s main residence, they will benefit from the main residence exemption when the property is sold.

    Planning a sale - Where a property is included within the estate, and the plan is to sell that property, consideration should be given to whether it should be sold by the personal representatives or the beneficiaries, and if a capital gain is likely to be realised, what will achieve the best outcome.

  • Statutory payments from April 2021

    By law, there are various statutory payments that an employer must make to an employee while the employee is absent from work due to the birth, adoption or death of a child. The employer must pay employees who meet the qualifying conditions at least the statutory amount for the relevant pay period. The statutory payment rates are increased from April 2021 and apply for the 2021/22 tax year.

    An employee is only entitled to statutory payments if their average earnings for the qualifying period are at least equal to the lower earnings limit for National Insurance purposes.

    Statutory maternity pay

    Statutory maternity pay (SMP) is payable to an employee who is on maternity leave. Although an employee can take up to 52 weeks’ statutory maternity leave, statutory maternity pay is only payable for 39 weeks. The payment ceases if the employee returns to work before the end of the maternity pay period (MPP).

    For the first six weeks of the MPP, SMP is payable at the rate of 90% of the employee’s average earnings. For the remainder of the MPP, SMP is paid at the lower of 90% of the employee’s average earnings and the standard amount. For 2021/22, this is set at £151.97 (up from £151.20 for 2020/21).

    Statutory adoption pay

    Statutory adoption pay (SAP) is payable to one parent on the adoption of a child. The other parent may be entitled to claim statutory paternity pay. The provisions for adoption pay and leave largely mirror those for maternity pay and leave – the employee is entitled to take up 52 weeks’ leave, while the adoption pay period (APP) runs for 39 weeks, unless the employee returns to work before the end of this period.

    As with SMP, SAP is payable at the rate of 90% of the employee’s average earnings for the first six weeks and at the standard amount, or 90% of the employee’s average earnings if lower, for the remainder of the adoption pay period. The standard amount is £151.97 per week for 2020/21.

    Statutory paternity pay

    Statutory paternity pay may be payable on the birth or the adoption of a child. The child’s father, mother’s partner or the adoptive parent who is not in receipt of SAP and leave may be entitled to statutory paternity leave and paternity pay. Eligible employees are entitled to two weeks’ statutory paternity leave which may be taken in a single block or in two one-week blocks.

    Statutory paternity pay is payable while the employee is on statutory paternity leave (as long as the eligible conditions are met) at the standard rate (£151.97 for 2021/22) or, if lower, at the rate of 90% of the employee’s average earnings.

    Shared parental pay

    The shared parental pay (ShPP) and leave provisions allow parents to share leave and pay following the birth or adoption of a child. Where an employee returns to work before the end of the MPP or APP, the employee can share the remaining leave and pay with their partner. Shared parental pay is payable at the standard amount, set at £151.97 for 2021/22, or where lower, at 90% of the employee’s average earnings.

    Statutory parental bereavement pay

    Parents are entitled to statutory parental bereavement leave following the death of a child under the age of 18 or a still birth after 24 weeks where this occurs on or after 6 April 2020. Bereaved parents are able to take two weeks’ parental bereavement leave, either in a single block or as two separate weeks. Eligible employees are also entitled to statutory parental bereavement pay (SPBP) at the standard amount (£151.97 for 2021/22) or, if less, at 90% of their average earnings.

  • Super-deduction for capital expenditure

    To encourage companies to invest, enhanced capital allowances are available for expenditure incurred within a limited two-year window. As an alternative to the annual investment allowance (AIA), companies will be able to benefit from either a super-deduction or a new first-year allowance, depending on whether the expenditure is on assets that would qualify for main rate capital allowance or for special rate capital allowances.

    Super-deduction

    The super-deduction will allow companies to claim capital allowances of 130% for expenditure on new assets that would otherwise qualify for main rate (18%) plant and machinery capital allowances where the expenditure is incurred in the period from 1 April 2021 to 31 March 2023. The super-deduction does not apply where the contract for the asset was entered into prior to 3 March 2021 (Budget Day), even if the expenditure is incurred in the qualifying two-year period. Plant and machinery which is purchased under Hire Purchase or similar contracts must meet additional conditions in order to qualify for the super-deduction.

    Where an accounting period straddles 1 April 2023, the rate of deduction is apportioned based on the number of days in the accounting period falling before 1 April 2023 and the number of days in the accounting period falling on or after this date.

    The effect of the super-deduction is that for every £100 of expenditure on qualifying assets in the qualifying period, the company can claim capital allowances of £130 when computing taxable profits. This gives an effective rate of relief of 24.7% (130% x 19%).

    Where an asset which has benefited from the super-deduction has been sold, disposal receipts are treated as balancing charges rather than being taken to pools. A factor of 1.3 is applied to the disposal receipt when calculating the balancing charge.

    Companies wishing to benefit from the super-deduction should plan the timing of investments in qualifying assets so that the expenditure is incurred in the qualifying two-year period. Where significant investment is planned after 1 April 2023, consideration could be given to accelerating the investment to benefit from the super-deduction.

    A company does not have to claim the super-deduction. Where the company is loss-making or profits are low, it may wish to claim writing down allowances instead or tailor the claim to reduce the profit to nil. Likewise, if the plan is to sell the asset in a few years, it may be preferable to claim writing down allowances rather than suffer the balancing charge on the disposal.

    New first-year allowance

    A new first-year allowance of 50% is available for expenditure on most new plant and machinery that would otherwise qualify for special rate writing down allowances of 6% where the expenditure is incurred in the period 1 April 2021 to 31 March 2023. As with the super-deduction, it is only available to companies.

    This is an alternative to the annual investment allowance, which gives a deduction of 100%. However, the first-year allowance may be beneficial where the AIA limit has already been reached.

  • Further grants for the self-employed

    The Self-Employment Income Support Scheme (SEISS) has provided grant support for self-employed individuals whose business has been adversely affected by the Covid-19 pandemic. An extension to the scheme was announced at the time of the 2021 Budget. As a result, it will continue to provide support until September 2021.

    Three grants have already been made under the scheme. As a result of the extension, a further two grants will be available. In addition, individuals who started trading in 2019/20 may now be eligible to claim.

    Fourth grant

    The fourth grant covers the period from February to April 2021 and is based on 80% of three months’ average trading profits. The amount of the grant is capped at £7,500. It is paid out in a single instalment.

    To be eligible, the trader must have filed his or her 2019/20 self-assessment tax return and traded in 2020/21. Only traders whose trading profit is not more than £50,000 in 2019/20 or, where trading profit exceeds this level in 2019/20, not more than £50,000 on average over the period from 2016/17 to 2019/20 can benefit from the grant. In addition, income from self-employment must account for at least 50% of the individual’s total income.

    To qualify for the grant, the trader must either:

    be trading currently but demand has fallen as a result of the impact of the Covid-19 pandemic; or

    have been trading but is unable to do so temporarily as a result of the Covid-19 pandemic.

    The trader must also declare that:

    they intend to continue trading; and

    they reasonably believe that there will be a significant reduction in their trading profits due to reduced business activity, capacity, demand or inability to trade due to Coronavirus.

    Claims for the fourth grant can be made online from late April 2021 until 31 May 2021.

    Fifth grant

    The fifth and final grant will cover the period from May to September 2021. The amount of this grant depends on the extent by turnover has fallen as a result of the Covid-19 pandemic.

    Traders who have suffered a reduction in turnover of at least 30% will be eligible for a grant worth 80% of three months’ average trading profits capped at £7,500. A smaller grant worth 30% of three months’ average trading profits capped at £2,850 will be available to traders who turnover has fallen as a result of coronavirus but where the reduction in turnover is less than 30%.

    Newly self-employed

    When the SEISS was originally launched, only those traders who had filed their 2018/19 tax return by 23 April 2020 could claim. As the filing date for the 2019/20 tax return of 31 January 2021 has now passed, individuals who commenced trading in 2019/20 and who have been adversely affected by the Covid-19 pandemic can claim the fourth and fifth grants under the scheme provided that they had filed their 2019/20 self-assessment return by midnight on 2 March 2021. They will also need to meet the other eligibility conditions.

    Grants are taxable

    Grants received under the SEIS are taxable and must be taken into account in working out the taxable profits for the year in which the grant is received.

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Adrian Mooy & Co - Accountants in Derby
61 Friar Gate Derby, Derbyshire DE1 1DJ
Phone: 01332 202660 Hours: Mon-Fri 9.00am - 5:00pm

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Adrian Mooy & Co is the trading name of Adrian Mooy & Co Ltd.  Registered in England No. 05770414.

Registered to carry out audit work in the UK by The Association of Chartered Certified Accountants.

Details of audit registration can be viewed at www.auditregister.org.uk under number 8011438.

Registered office: 61 Friar Gate, Derby, Derbyshire, DE1 1DJ